The recently enacted One Big Beautiful Bill Act (OBBBA) is poised to deliver powerful new incentives for commercial real estate (CRE) stakeholders starting in 2027.
Building on the momentum of the 2017 Tax Cuts and Jobs Act (TCJA), this landmark legislation aims to expand and refine key tax advantages that have long supported CRE growth.
Notably, the OBBBA introduces promising enhancements for the future with respect to the Qualified Opportunity Zone (QOZ) program. The QOZ program, both in its current and enhanced form, offers substantial benefits and remains a powerful tool for managing wealth, minimizing taxes, and pursuing long-term growth. For those seeking immediate deferral of capital gains tax on eligible asset sales while participating in the development of underserved communities across the United States, the QOZ program remains a cornerstone strategy. Below is a comparison of the current QOZ program (QOZ 1.0) vs. the new program (QOZ 2.0), effective January 1, 2027:
QOZs Present and Future1
Opportunity zones were created in 2017 to stimulate private investment in more than 8,700 census tracts across the U.S. that were identified by the U.S. Treasury as economically distressed areas. And there is still time to invest in QOZs. In fact, the QOZ market raised $810M in Q1 2025, signaling a strong appetite for the program.2
QOZ investments enable taxpayers to defer capital gains on virtually any asset, including stocks, bonds, mutual funds, art, jewelry, cryptocurrency, real estate, and more. In recent years, many investors have realized significant capital gains from business sales, stock market growth, real estate appreciation, or private equity exits that would equate to a hefty tax bill.
Under QOZ 1.0, QOZs provide an opportunity to defer tax on capital gains until December 31, 2026 and, more importantly, eliminate capital gains tax entirely on a QOZ investment if held for 10 years or more.
The OBBBA introduces significant, positive changes for the QOZ program. Importantly, the QOZ program has been extended indefinitely under the OBBBA. State governors will be able to propose new opportunity zones every 10 years.
Other notable changes include that after December 31, 2026, gains deferred through investment in the QOZ program will be triggered into income on the fifth anniversary of the investment date. Additionally, the 10 percent basis step-up benefit, which takes effect immediately before the end of the five-year gain deferral period, is permanent under the OBBBA. For QOZ 2.0, all gains that are not prematurely triggered will have the benefit of a 10 percent basis increase.
The OBBBA also creates a new “Qualified Rural Opportunity Fund” (QROF) for “rural areas” defined as any area other than (1) a city or town with a population of greater than 50,000, and (2) an urbanized area adjacent to a city or town with a population in excess of 50,000. The tax benefits for these QROFs are augmented, including a rolling 30 percent basis-step up after five years (compared to a 10 percent step-up for “regular” QOFs).
Despite time marching toward the burn-off of some of the benefits of the original QOZ program, we believe the QOZ program will remain a strong part of wealth and tax-management strategies for financial and tax advisors and their clients. Regardless of investment objective (total return, diversification or simply tax deferral), the QOZ program has introduced a unique strategy that could potentially improve both investment portfolios returns and structure while providing economic benefits to underserved communities.
Sources:
1 The National Law Review. Congress Establishes Permanent Opportunity Zones. July 10, 2025.
2 https://altswire.com/qualified-opportunity-zone-funds-raise-more-than-810-million-in-q1-2025/
3 https://www.seyfarth.com/news-insights/7-key-changes-to-the-qualified-opportunity-zone-incentive-under-the-one-big-beautiful-bill-act.html
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